COHERUS BIOSCIENCES, INC. The interim financial statements included in this Quarterly Report on Form 10-Q and this Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year endedDecember 31, 2020 , and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, contained in the 2020 Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended "Exchange Act". These forward-looking statements are subject to risks and uncertainties, including those discussed in the section titled "Risk Factors," set forth in Part II - Other Information, Item 1A below and elsewhere in this report, that could cause actual results to differ materially from historical results or anticipated results.
Overview
We are a commercial-stage biopharmaceutical company with a mission to increase patient access to cost-effective medicines that can have a major impact on their lives and to deliver significant savings to the health care system. Our strategy is to build a leading immuno-oncology franchise inthe United States andCanada funded with cash generated by our commercial biosimilar business. Our first product, UDENYCA® (pegfilgrastim-cbqv), a biosimilar to Neulasta®, a long-acting granulocyte-colony stimulating factor, was launched commercially inthe United States inJanuary 2019 . In addition to UDENYCA®, we have a product candidate pipeline that includes biosimilars of Humira®, Avastin® and Lucentis®. Biosimilars are a class of protein-based therapeutics with high similarity to approved originator products on the basis of rigorous standards set by theU.S. Food and Drug Administration ("FDA") for biosimilarity. We have become a leader in the biosimilar market by leveraging our team's collective expertise in key areas such as process science, analytical characterization, protein production, clinical-regulatory development and commercialization. InFebruary 2021 , we in-licensed our first immuno-oncology product candidate, toripalimab, a novel anti-PD-1 antibody, from Shanghai Junshi Biosciences Co., Ltd. ("Junshi Biosciences"). Toripalimab has been extensively evaluated in late-stage clinical trials for the treatment of multiple tumor types. The FDA has granted Priority Review for the toripalimab biologics license application ("BLA"), for the treatment of nasopharyngeal carcinoma ("NPC"), and set a Prescription Drug User Fee Act "(PDUFA") action date forApril 2022 . Within the next several years, we anticipate BLA supplements for multiple additional indications, including for rare and more prevalent tumor types, including non-small cell lung cancer. We have also acquired options to license two pipeline immuno-oncology product candidates from Junshi Biosciences, an anti-TIGIT antibody and a next-generation engineered IL-2 cytokine, for potential evaluation in combination with toripalimab.
With our UDENCYA® commercialization efforts, we have built a strong,
oncology-focused commercial capability in
Our pipeline includes the following product candidates:
Oncology Pipeline
Toripalimab, an anti-PD-1 antibody being developed in collaboration with Junshi
Biosciences, a leading Chinese biotechnology company. More than thirty
? company-sponsored clinical studies have been conducted globally, including in
indications. We and Junshi Biosciences completed the submission of the toripalimab BLA to the FDA for the treatment of NPC in the third quarter of 2021 and the FDA granted the BLA Priority Review with a target action date ofApril 2022 . In addition to NPC, we plan to submit supplemental BLAs to the FDA for toripalimab within
the
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next two years for the treatment of several rare and highly prevalent cancers, including non-small cell lung cancer.
The FDA has granted Breakthrough Therapy designation for patients with recurrent or metastatic NPC with disease progression on or after platinum-containing chemotherapy and for toripalimab in combination with chemotherapy (gemcitabine and cisplatin) for the first line treatment of recurrent or metastatic NPC. The FDA has also granted toripalimab Fast Track designation for the treatment of mucosal melanoma and orphan drug designations for treatment of NPC, mucosal melanoma and soft tissue sarcoma.
UDENYCA® (pegfilgrastim-cbqv). We are developing additional presentations of
UDENYCA®, including a proprietary on-body injector ("OBI"), in addition to the
currently marketed pre-filled syringe ("PFS") presentation. In
announced positive results from a randomized, open-label, crossover study
? assessing the pharmacokinetic ("PK") and pharmacodynamic bioequivalence of
UDENYCA® (pegfilgrastim-cbqv) administered via OBI compared to UDENYCA® PFS. We
are planning a 2022 submission to the FDA of a prior approval supplement to
seek marketing authorization for the UDENYCA® OBI and anticipate a 10-month
review period.
CHS-305, a bevacizumab (Avastin) biosimilar. On
into a license agreement with
("Innovent," and with respect to the license agreement with Innovent, the
"Innovent Agreement") for the development and commercialization of a biosimilar
? version of bevacizumab (Avastin) in any dosage form and presentations
("bevacizumab Licensed Product") in
performing a three-way PK study using Avastin drug products from the United
States, Avastin drug products fromChina and Innovent's biosimilar to bevacizumab, as well additional analytical similarity exercises prior to facilitating a potential BLA submission for CHS-305 to the FDA.
Immunology Pipeline
CHS-1420 (our adalimumab (Humira) biosimilar candidate). We are developing
CHS-1420, an anti-TNF product candidate, as an adalimumab (Humira) biosimilar.
In the fourth quarter of 2020, we submitted the 351(k) BLA, which was accepted
for review by the FDA in
? 2021. If approved, we anticipate we would be able to launch CHS-1420 in the
license agreements with AbbVie Inc. ("AbbVie") that grants us global,
non-exclusive license rights under AbbVie's intellectual property to
commercialize CHS-1420.
Ophthalmology Pipeline
CHS-201, a ranibizumab (Lucentis) biosimilar. On
into a license agreement with
commercialization of CHS-201, a biosimilar version of ranibizumab (Lucentis) in
? certain dosage forms in both a vial and PFS presentation. Under this agreement,
Bioeq granted to us an exclusive royalty-bearing license to commercialize
CHS-201 in the field of ophthalmology (and any other approved labelled
indication) in
Bioeq submitted a BLA for CHS-201 to the FDA in the third quarter of 2021. The FDA has accepted the CHS-201 BLA for review and assigned anAugust 2022 target action date. Small Molecule Pipeline
CHS-131 (our oral, small-molecule drug candidate). CHS-131 is a novel,
potential first-in-class, once-daily oral drug candidate for non-alcoholic
? steatohepatitis ("NASH") and other metabolic conditions. In
announced that we are seeking strategic alternatives to finance this program
externally.
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COVID-19 Update
As a result of the COVID-19 pandemic, we have experienced and may continue to experience disruptions that could severely impact our business, clinical trials and preclinical studies. See "Risk Factors." These and other factors arising from the COVID-19 pandemic could result in us not being able to maintain UDENYCA®'s market position or increase its penetration against all Neulasta's dosage forms and could result in our inability to meet development or regulatory milestones for our product candidates, each of which would harm our business, financial condition, results of operations and growth. Until the COVID-19 pandemic is controlled, we expect it may continue to adversely impact our sales growth. In addition, the spread of more contagious and deadly variants, such as the Delta variant, could cause the COVID-19 pandemic to last longer than expected and could result in the reinstatement of restrictive orders that could disrupt our business. While the long-term economic impact and the duration of the COVID-19 pandemic may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, which could reduce our ability to access capital and could negatively affect our liquidity and the liquidity and stability of markets for our common stock and our convertible notes. In addition, a recession, market correction or depression resulting from the spread of COVID-19 could materially affect our business and the value of our notes and our common stock.
Financial Operations Overview
Revenue
We recorded net product revenue of$82.5 million and$113.6 million during the three months endedSeptember 30, 2021 and 2020, respectively, and$253.2 million and$365.4 million during the nine months endedSeptember 30, 2021 and 2020, respectively. Cost of Goods Sold Cost of goods sold consists primarily of third-party manufacturing, distribution, and overhead costs associated with UDENYCA®. Prior to the second quarter 2021, a portion of the costs of producing UDENYCA® sold was expensed as research and development before the FDA approval of UDENYCA® and therefore was not reflected in the cost of goods sold. All the inventory expensed prior to approval of UDENYCA® was fully utilized byMarch 31, 2021 ; thus, the costs of producing UDENYCA® are fully reflected in cost of goods sold for the three months endedSeptember 30, 2021 . For the three and nine months endedSeptember 30, 2021 , cost of goods sold included write-offs for inventory that did not meet our acceptance criteria, net of credits received from the manufacturers, of$5.2 million and$5.1 million , respectively. OnMay 2, 2019 , we settled a trade secret action brought by Amgen Inc. andAmgen USA Inc. (collectively "Amgen"). As a result, cost of goods sold reflects a mid-single digit royalty on net product revenue, which beganJuly 1, 2019 and continues for five years from then.
Research and Development Expense
Research and development expense represents costs incurred to conduct research, such as the discovery and development of our product candidates. We recognize all research and development costs as they are incurred. We currently track research and development costs incurred on a product candidate basis only for external research and development expenses. Our external research and development expense consists primarily of:
expense incurred under agreements with consultants, third-party contract
? research organizations ("CROs"), and investigative sites where a substantial
portion of our preclinical studies and all of our clinical trials are
conducted;
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costs of acquiring originator comparator materials and manufacturing
? preclinical study and clinical trial supplies and other materials from contract
manufacturing organizations, and related costs associated with release and
stability testing;
? costs associated with manufacturing process development activities; and
? upfront and certain milestone payments related to licensing and collaboration
agreements.
Internal costs are associated with activities performed by our research and development organization and generally benefit multiple programs. These costs are not separately allocated by product candidate. Unallocated, internal research and development costs consist primarily of:
? personnel-related expense, which includes salaries, benefits and stock-based
compensation; and
facilities and other allocated expense, which includes direct and allocated
? expenses for rent and maintenance of facilities, depreciation and amortization
of leasehold improvements and equipment, laboratory and other supplies.
The largest component of our total operating expense has historically been our investment in research and development activities, including the clinical development and manufacturing process development of our product candidates.
We consider regulatory approval of product candidates to be uncertain, and any products manufactured prior to regulatory approval may not be sold unless regulatory approval is obtained. We expense manufacturing costs as incurred for product candidates prior to regulatory approval as research and development expense. If, and when, regulatory approval of a product candidate is obtained, we will begin capitalizing manufacturing costs related to the approved product into inventory. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming. Furthermore, in the past, we have entered into collaborations with third parties to participate in the development and commercialization of our product candidates, and we may enter into additional collaborations in the future. In situations in which third parties have substantial influence over the development activities for product candidates, the estimated completion dates are not fully under our control. For example, our partners in licensed territories may exert considerable influence on the regulatory filing process globally. Therefore, we cannot forecast with any degree of certainty the duration and completion costs of these or other current or future clinical trials of our product candidates. We may never succeed in achieving regulatory approval for any of our pipeline product candidates. In addition, we may enter into other collaboration arrangements for our other product candidates, which could affect our development plans or capital requirements.
Selling, General and Administrative Expense
Selling, general and administrative expense consists primarily of personnel costs, allocated facilities costs and other expense for outside professional services, including legal, insurance, human resources, outside marketing, advertising, audit and accounting services, as well as costs associated with establishing commercial capabilities in support of the commercialization of UDENYCA®. Personnel costs consist of salaries, benefits and stock-based compensation.
Interest Expense
Interest expense consists primarily of interest incurred on our outstanding indebtedness and non-cash interest related to the amortization of debt discount and debt issuance costs associated with our outstanding debt agreements.
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Other Income, Net
Other income, net consists primarily of interest earned from our investments in marketable securities and foreign exchange gains and losses resulting from currency fluctuations.
Significant Transactions
License Agreement with Junshi Biosciences
On
Under the terms of the Collaboration Agreement, we paid$150.0 million upfront for exclusive rights to toripalimab inthe United States andCanada , options in these territories to Junshi Biosciences' anti-TIGIT antibody and next-generation engineered IL-2 cytokine, and certain negotiation rights to two undisclosed preclinical immuno-oncology drug candidates. We will have the right to conduct all commercial activities of toripalimab inthe United States andCanada . We will be obligated to pay Junshi Biosciences a 20% royalty on net sales of toripalimab and up to an aggregate$380.0 million in one-time payments for the achievement of various regulatory and sales milestones. If we exercise our options, we will be obligated to pay an option exercise fee for each of the anti-TIGIT antibody and the IL-2 cytokine of$35.0 million per program. Additionally, for each exercised option, we will be obligated to pay Junshi Biosciences an 18% royalty on net sales and up to an aggregate$255.0 million for the achievement of various regulatory and sales milestones. Under the Collaboration Agreement, we retain the right to collaborate in the development of toripalimab and the other licensed compounds, and will pay for a portion of these co-development activities up to a maximum of$25.0 million per licensed compound per year. Additionally, we are responsible for certain associated regulatory and technology transfer costs for toripalimab and other licensed compounds and will reimburse Junshi Biosciences for such costs. We recognized research and development expense of$15.4 million and$37.6 million in the condensed consolidated statement of operations for the three and nine months endedSeptember 30, 2021 , respectively, and recognized$19.7 million in accounts payable and$11.2 million in accrued and other current liabilities on the condensed consolidated balance sheet as ofSeptember 30, 2021 related to the co-development, regulatory and technology transfer costs. We accounted for the licensing transaction as an asset acquisition under the relevant accounting rules. We recorded research and development expense of$145.0 million during the first quarter of 2021, related to an upfront payment for exclusive rights to toripalimab inthe United States andCanada . We had entered into a Right of First Negotiation agreement with Junshi Biosciences and paid a fee of$5.0 million which was fully expensed as research and development expense in the fourth quarter of 2020. The Right of First Negotiation fee was fully credited against the total upfront license fee obligation under the Collaboration Agreement. As ofSeptember 30, 2021 , we did not have any outstanding milestone or royalty payment obligations to Junshi Biosciences.
The additional milestone payments, option fees for additional anti-TIGIT antibodies and the IL-2 cytokines and royalties are contingent upon future events and, therefore, will be recorded when it is probable that a milestone will be achieved, option fees will be incurred or when royalties are due.
In connection with the Collaboration Agreement, we entered into a stock purchase agreement (the "Stock Purchase Agreement") with Junshi Biosciences agreeing, subject to customary conditions, to acquire certain equity interests in the Company. Pursuant to the Stock Purchase Agreement, onApril 16, 2021 , we issued 2,491,988 unregistered shares of our common stock to Junshi Biosciences, at a price per share of$20.0643 , for an aggregate value of approximately$50.0 million cash. Under the terms of the Stock Purchase Agreement, Junshi Biosciences is not permitted to sell, transfer, make any short sale of, or grant any option for the sale of the common stock for the two years period following its effective date. The Collaboration Agreement and the Stock Purchase Agreement were negotiated concurrently and were therefore evaluated as a single agreement. We used the "Finnerty" and "Asian put" valuation models and determined the fair value for the discount for lack of marketability ("DLOM") to be$9.0 million at the date 34 Table of Contents
the shares were issued. The fair value of the DLOM was attributable to the Collaboration Agreement and was included as an offset against the research and development expense in the condensed consolidated statement of operations for the nine months endingSeptember 30, 2021 .
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance withUnited States generally accepted accounting principles ("U.S. GAAP"). The preparation of financial statements in conformity withU.S. GAAP requires us to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue and expenses, and related disclosures. As appropriate, we periodically evaluate our critical accounting policies and estimates. Our estimates are based on historical experience and on various other factors that we believed to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Accounting estimates and judgements are inherently uncertain and actual results could differ from these estimates. There have been no significant changes to our accounting policies during the nine months endedSeptember 30, 2021 , as compared to the significant accounting policies described in our 2020 Form 10-K. We believe that the accounting policies discussed in the 2020 Form 10-K are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
Recent Accounting Pronouncements
For a description of the expected impact of recent accounting pronouncements, see "Note 1. Organization and Summary of Significant Accounting Policies" in the "Notes to Condensed Consolidated Financial Statements" contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Results of Operations
Comparison of Three and Nine Months Ended
Net Revenue
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 2021 2020 Change 2021 2020 Change
Net product revenue $ 82,503 $ 113,551 $ (31,048) $ 253,180 $ 365,405 $ (112,225) Net product revenue for the three and nine months endedSeptember 30, 2021 was$82.5 million and$253.2 million , respectively, compared to$113.6 million and$365.4 million for the three and nine months endedSeptember 30, 2020 , respectively. The decreases were primarily due to a decrease in the number of units of UDENYCA® sold during the three and nine months endedSeptember 30, 2021 , as well as an increase in discounts and allowances during the nine months endedSeptember 30, 2021 .
Our net product revenue and market penetration may continue to be adversely impacted by the COVID-19 pandemic and is subject to pricing trends and competitive dynamics in the overall pegfilgrastim market.
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Cost of goods sold
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 2021 2020 Change 2021 2020 Change
Cost of goods sold $ 21,280 $ 9,000 $ 12,280 $ 45,487 $ 25,994 $ 19,493
Gross margin 74 % 92 % 82 % 93 %
Cost of goods sold was $21.3 million and $45.5 million for the three and nine
months ended September 30, 2021 , respectively, compared to $9.0 million and
$26.0 million for the three and nine months ended September 30, 2020 ,
respectively. Cost of goods sold consists primarily of third-party
manufacturing, distribution, overhead costs associated with the sale of UDENYCA®
and a mid-single digit royalty cost on net product revenue to Amgen, which began
on July 1, 2019 and will continue for five years from then. For the nine months
ended September 30, 2021 and 2020, a portion of the manufacturing costs for
inventory were incurred prior to the regulatory approval of UDENYCA® and,
therefore, were expensed as research and development costs prior to those
periods. The cost basis of product sold that was expensed prior to approval, was
$0 and $5.3 million for the three months ended September 30, 2021 and 2020,
respectively and $3.3 million and $15.9 million for the nine months ended
September 30, 2021 and 2020, respectively. Had such inventories been valued at
acquisition cost, it would have resulted in corresponding increases in cost of
goods sold and corresponding decreases in gross margin prior to the second
quarter of 2021. All the inventory expensed prior to approval of UDENYCA® was
fully utilized by March 31, 2021 . In addition, for the three and nine months
ended September 30, 2021 , cost of goods sold included write-offs for inventory
that did not meet our acceptance criteria, net of credits received from the
manufacturers, of $5.2 million and $5.1 million , respectively.
In the fourth quarter of 2021, we expect our gross margin to improve as compared
to the third quarter of 2021 due to anticipated reduced period charges. In
comparison to the same period of the prior year, our gross margin in the fourth
quarter of 2021 is expected to be lower due primarily to the transition in the
first quarter 2021 from inventory with manufacturing costs that were partly
recognized as research and development expenses prior to the regulatory approval
of UDENYCA®.
Research and Development Expense
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 2021 2020 Change 2021 2020 ChangeResearch and development$ 54,085 $ 38,851 $ 15,234 $
312,343$ 98,131 $ 214,212 Research and development expense for the three months endedSeptember 30, 2021 was$54.1 million compared to$38.9 million for the same period in 2020, an increase of$15.2 million . The increase in research and development expense was primarily due to the following:
? an increase of
? an increase of
presentations of UDENYCA®;
? an increase of
related to equity awards granted in 2021;
The increase in research and development expense for the three months ended
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a decrease of
? quarter of 2021 resulting in no costs being incurred in the third quarter of
2021, as compared to
quarter of 2020; and
a milestone-based license fee payment of
? the Innovent Agreement made in the third quarter of 2020 did not recur in the
same period in 2021.
We project R&D expense in the fourth quarter of 2021 to be comparable to the third quarter of 2021.
Research and development expense for the nine months endedSeptember 30, 2021 was$312.3 million compared to$98.1 million for the same period in 2020, an increase of$214.2 million . The increase in research and development expense was primarily due to the following:
2021 includes license fees of
Agreement with Junshi Biosciences which was partially offset by a
? credit related to the fair value of the DLOM on the common shares purchased
under the Stock Purchase Agreement, as compared to 2020 which included upfront
and milestone-based license fees of
? an increase of
? an increase of
presentations of UDENYCA®;
an increase of
? associated with FDA pre-approval inspections and scaling up Process Performance
Qualification production runs;
an increase of
? bevacizumab (Avastin) biosimilar product candidate licensed from Innovent in
2020;
an increase of
? related to the grant of fully vested stock options to certain employees and
consultants upon the execution of the Collaboration Agreement with Junshi
Biosciences and additional equity awards granted in 2021; and
? an increase of
research and development programs.
The increase in research and development expense for the nine months ended
a decrease of
? to
discontinuation of that program compared to
incurred in the nine months ended
? a decrease of
discontinuation of the development of CHS-131 in 2021.
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Selling, General and Administrative Expenses
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 2021 2020 Change
2021 2020 Change
Selling, general and administrative
Selling, general and administrative expense for the three months endedSeptember 30, 2021 was$39.9 million compared to$32.0 million for the three months endedSeptember 30, 2020 , an increase of$7.9 million . The increase was primarily due to the following:
an increase of
? marketing, advertising and other related expenses due to an increase in sales
force personnel and related commercial functions to support UDENYCA® sales;
? an increase of
to additional equity awards granted in 2021;
an increase of
? infrastructure related expenses to support our commercial infrastructure
for UDENYCA®; and
an increase of
? expenses as a result of COVID-19 shelter-in-place restrictions in the prior
year quarter resulting in less travel and related expenses.
We expect selling, general and administrative expense to increase during the remainder of 2021 primarily as a result of anticipated increased commercial activities to support UDENYCA® sales and as a result of initiating our ophthalmology and immuno-oncology commercial activities.
Selling, general and administrative expense for the nine months endedSeptember 30, 2021 was$119.7 million compared to$101.4 million for the nine months endedSeptember 30, 2020 , an increase of$18.3 million . The increase was primarily due to the following:
a net increase of
? services, marketing, advertising and other related expenses due to an increase
in sales force personnel and related commercial functions to support UDENYCA®
sales;
an increase of
? to the grant of fully vested stock options to certain employees and consultants
upon the execution of the Collaboration Agreement with Junshi Biosciences and
additional equity awards granted in 2021; and
an increase of
? infrastructure related expenses to support our commercial infrastructure
for UDENYCA®.
Interest Expense
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 2021 2020 Change 2021 2020 Change
Interest expense $ 5,771 $ 5,656 $ 115 $ 17,166 $ 15,495 $ 1,671
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Interest expense for the three months ended September 30, 2021 was $5.8 million
compared to $5.7 million for the same period in 2020, an increase of $0.1
million . Interest expense for the nine months ended September 30, 2021 was $17.2
million compared to $15.5 million for the same period in 2020, an increase of
$1.7 million . The increase in interest expense for both periods is primarily due
to the interest related to our 2026 convertible notes ("2026 Convertible Notes")
that were issued in April 2020 .
Income Tax Provision
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 2021 2020 Change 2021 2020 Change
Income tax provision $ - $ 183 $ (183) $ - $ 2,411 $ (2,411)
There was no income tax expense for the three and nine months ended September
30, 2021 due to a projected tax loss for 2021 and the tax effect of the
valuation allowance against such loss for the year. Income tax expense of $0.2
million and $2.4 million for the three and nine months ended September 30, 2020 ,
primarily related to state taxes in jurisdictions outside of California , for
which we have a limited operating history. The income tax provision during the
interim periods is based on applying an estimated annual effective income tax
rate to year to date income, plus any significant unusual or infrequently
occurring items, which are recorded in the interim period. We maintain a full
valuation allowance against our net deferred tax assets due to our history of
losses.
Liquidity and Capital Resources
Due to our significant research and development expenditures, we have generated significant operating losses since our inception. We have funded our operations primarily through sales of our common stock and convertible preferred stock, issuance and incurrence of debt and sales of UDENYCA®. As ofSeptember 30, 2021 , we had an accumulated deficit of$1.0 billion , cash and cash equivalents of$360.5 million and investments in marketable securities of$108.2 million . We believe that our current available cash, cash equivalents, investments in marketable securities and cash collected from UDENYCA® sales will be sufficient to fund our planned expenditures and meet our obligations for at least the next 12 months following our financial statement issuance date. We may need to raise additional funds in the future; however, there can be no assurance that such efforts will be successful or that, if they are successful, the terms and conditions of such financing will be favorable. InFebruary 2016 , we issued and sold$100.0 million aggregate principal amount of our 8.2% Convertible Senior Notes due inMarch 2022 (the "2022 Convertible Notes"). These 2022 Convertible Notes require quarterly interest distributions at a fixed coupon rate of 8.2% until maturity, redemption or conversion, which will be no later thanMarch 31, 2022 . If we fail to satisfy certain registration or reporting requirements, then additional interest will accrue on the 2022 Convertible Notes at a rate of up to 0.50% per annum in the aggregate. The holders of the 2022 Convertible Notes areHealthcare Royalty Partners III, L.P. and three of its related entities, which hold$75.0 million in aggregate principal amount, and three related party investors,KKR Biosimilar L.P. , which holds$20.0 million ,MX II Associates LLC , which holds$4.0 million , andKMG Capital Partners, LLC , which holds$1.0 million . The 2022 Convertible Notes are convertible into shares of common stock at an initial conversion rate of 44.7387 shares of common stock per$1,000 principal amount of the 2022 Convertible Notes (equivalent to a conversion price of approximately$22.35 per share of common stock, representing a 60% premium over the average last reported sale price of our common stock over the 15 trading days preceding the date the 2022 Convertible Notes were issued), subject to adjustment in certain events. Upon conversion of the 2022 Convertible Notes by a holder, the holder will receive shares of our common stock, together, if applicable, with cash in lieu of any fractional share. AfterMarch 31, 2020 , the full amount of the 2022 Convertible Notes not previously converted are redeemable for cash at our option if the last reported sale price per share of our common stock exceeds 160% of the conversion price on 20 or more trading days during the 30 consecutive trading days preceding the date on which we send notice of such redemption to the holders of the 2022 Convertible Notes. At maturity or redemption, if not earlier converted, we will pay 109% of the principal amount of the 2022 Convertible Notes, 39
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together with accrued and unpaid interest, in cash. InApril 2020 , we amended the 2022 Convertible Notes purchase agreement in connection with the issuance and sale of our 2026 Convertible Notes (as defined below). OnJanuary 7, 2019 (the "Term Loan Closing Date"), we entered into a credit agreement (the "Term Loan") with affiliates ofHealthcare Royalty Partners (together, the "Lender"). The Term Loan consists of a six-year term loan facility for an aggregate principal amount of$75.0 million (the "Borrowings"). Our obligations under the loan documents are guaranteed by our material domesticU.S. subsidiaries.
The Borrowings under the Term Loan bear interest through maturity at 6.75% per annum plus LIBOR (customarily defined). Interest is payable quarterly in arrears.
We are required to pay principal on the Borrowings in equal quarterly installments beginning on the third anniversary of the Term Loan Closing Date (or, if consolidated net sales of UDENYCA® in the fiscal year endingDecember 31, 2021 exceed$375.0 million , beginning on the fourth anniversary of the Term Loan Closing Date, with the outstanding balance to be repaid onJanuary 7, 2025 , the maturity date. As ofSeptember 30, 2021 ,$17.3 million of the carrying value was classified as current liabilities on our condensed consolidated balance sheets based upon our expectation that principal payments will commence within twelve months ofSeptember 30, 2021 . We are also required to make mandatory prepayments of the Borrowings under the Term Loan, subject to specified exceptions, with the proceeds of asset sales, extraordinary receipts, debt issuances and specified other events including the occurrence of a change in control. If all or any of the Borrowings are prepaid or required to be prepaid under the Term Loan, then we shall pay, in addition to such prepayment, a prepayment premium equal to (i) with respect to any prepayment paid or required to be paid on or prior to the third anniversary of the Term Loan Closing Date, 5.00% of the Borrowings prepaid or required to be prepaid, plus all required interest payments that would have been due on the Borrowings prepaid or required to be prepaid through and including the third anniversary of the Term Loan Closing Date, (ii) with respect to any prepayment paid or required to be paid after the third anniversary of the Term Loan Closing Date but on or prior to the fourth anniversary of the Term Loan Closing Date, 5.00% of the Borrowings prepaid or required to be prepaid, (iii) with respect to any prepayment paid or required to be paid after the fourth anniversary of the Term Loan Closing Date but on or prior to the fifth anniversary of the Term Loan Closing Date, 2.50% of the Borrowings prepaid or required to be prepaid, and (iv) with respect to any prepayment paid or required to be prepaid thereafter, 1.25% of the Borrowings prepaid or required to be prepaid. In connection with the Term Loan, we paid a fee to the Lender of approximately$1.1 million at closing in the form of an original issue discount. Upon the prepayment or maturity of the Borrowings (or upon the date such prepayment or repayment is required to be paid), we are required to pay an additional exit fee in an amount equal to 4.00% of the total principal amount of the Borrowings. The obligations under the Term Loan are secured by a lien on substantially all of our tangible and intangible property, including intellectual property. The Term Loan contains certain affirmative covenants, negative covenants and events of default, including, covenants and restrictions that among other things, restrict our ability and our subsidiaries to, incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, in asset sales, and declare dividends or redeem or repurchase capital stock. Additionally, the consolidated net sales for UDENYCA® must not be lower than$150.0 million for each fiscal year after the year endedDecember 31, 2020 . A failure to comply with these covenants could permit the Lender under the Term Loan to declare the Borrowings, together with accrued interest and fees, to be immediately due and payable. InApril 2020 , we amended the Term Loan in connection with the issuance and sale of our 2026 Convertible Notes. InApril 2020 , we issued and sold$230 million aggregate principal amount of 1.5% convertible senior subordinated notes due 2026 in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. In 40 Table of Contents
connection with the pricing of the 2026 Convertible Notes, we entered into privately negotiated capped call transactions with one or more of the initial purchasers or their respective affiliates and/or other financial institutions (the "option counterparties"). The cap price of the capped call transactions will initially be$25.9263 per share, which represents a premium of approximately 75.0% over the last reported sale price of our common stock of$14.815 per share onApril 14, 2020 , and is subject to certain adjustments under the terms of the capped call transactions. The 2026 Convertible Notes are general unsecured obligations and will be subordinated to our designated senior indebtedness. The 2026 Convertible Notes accrue interest at a rate of 1.5% per annum, payable semi-annually in arrears onApril 15 andOctober 15 of each year, sinceOctober 15, 2020 , and will mature onApril 15, 2026 , unless earlier repurchased or converted. At any time before the close of business on the second scheduled trading day immediately before the maturity date, holders may convert their 2026 Convertible Notes at their option into shares of our common stock, together, if applicable, with cash in lieu of any fractional share, at the then-applicable conversion rate. The initial conversion rate is 51.9224 shares of common stock per$1,000 principal amount of 2026 Convertible Notes, which represents an initial conversion price of approximately$19.26 per share of common stock. The initial conversion price represents a premium of approximately 30.0% over the last reported sale of$14.815 per share of our common stock on the Nasdaq Global Market onApril 14, 2020 , the date the 2026 Convertible Notes were issued. The conversion rate and conversion price will be subject to customary adjustments upon the occurrence of certain events. If a "make-whole fundamental change" (as defined in the indenture for the 2026 Convertible Notes) occurs, we will, in certain circumstances, increase the conversion rate for a specified period of time for holders who convert their 2026 Convertible Notes in connection with that make-whole fundamental change. The 2026 Convertible Notes are not redeemable at our election before maturity. If a "fundamental change" (as defined in the indenture for the 2026 Convertible Notes) occurs, then, subject to a limited exception, holders may require us to repurchase their 2026 Convertible Notes for cash. The repurchase price will be equal to the principal amount of the 2026 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable repurchase date. The net proceeds from the offering were$222.2 million , net of the initial purchasers' fees and the offering expenses. We used approximately$18.2 million of the net proceeds to fund the cost of entering into the capped call transactions.
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